The business behind the show

On Location: Sacramento delivers a mixed bag of film tax credits

Faced with the prospect of the curtain falling on California’s film tax credits, Hollywood breathed a collective sigh of relief after lawmakers approved a bill for a one-year extension of the program.

But the mood was far from celebratory because the legislation, which is awaiting Gov. Jerry Brown's signature, included a much shorter extension than industry advocates had hoped for.

The tax credit, aimed at keeping film and TV productions -- and the business activity they generate -- in California, is due to expire next year. Hollywood had been lobbying for a five-year extension, but that request was opposed by lawmakers who balked at setting aside $500 million at a time when the state was having to cut social services and lay off teachers to cope with a massive budget deficit.

"A one-year extension is better than nothing, but quite frankly we would have preferred a five-year extension,’’ said Thom Davis, business agent for Local 80 of the International Alliance of Theatrical Stage Employees, which represents grips and craft services workers. “That would have given TV producers the certainty they need to plan for a series for several years, so we’re concerned about that.”

Steve Dayan, business agent for Teamsters Local 399, which represents casting directors, studio drivers and location managers, also expressed disappointment that lawmakers didn’t go further. “Although we’re gratified they extended it for another year, we need to do better if we’re going to keep this industry in the state,” Dayan said, adding that the program is much needed to keep film work from flowing to states such as Louisiana, Georgia and New York, which offers an annual incentive quadruple the size of California’s.

While several states have recently cut back or suspended their tax-credit programs amid tight finances, nearly 40 states along with such foreign countries as Canada and Britain still offer film incentives, making it increasingly difficult to keep production in Southern California. Advocates say the California film tax incentive -- which offers up to a 25% tax credit toward qualified production expenses -- has kept thousands of jobs from leaving the state.

“There is the impression that this money goes to fat-cat producers and people on runways and red carpets,” Dayan said. “The truth of the matter is this money goes to below-the-line workers and the hardware stores, furniture stores, equipment rental vendors and other small businesses that support the industry.’’

Nonetheless, Dayan and other Hollywood labor leaders were encouraged that the bill drew broad bipartisan support -- it easily passed in both houses -- and didn’t come with any strings attached. Industry officials were alarmed over an earlier version of the bill that included so-called budget triggers, making $100 million in funding for the tax credits contingent on the state meeting certain revenue projections that many believe it is unlikely to meet.

“Our biggest concern was not so much the number of years, but the trigger; that would have killed the program,’’ said Kathy Garmezy, associate executive director for government affairs at the Directors Guild of America.

The Motion Picture Assn. of America, which represents Hollywood’s major studios and had been pressing for a five-year extension, also saw something positive in the outcome.

“We’re gratified the Legislature overwhelmingly endorsed the program by voting to extend it for another year and there’s always the opportunity to go back and look at it next year,’’ said Vans Stevenson, senior vice president of government affairs for the MPAA.

Brown, who previously endorsed a five-year extension as part of a broader tax plan that failed to win enough votes, is expected to sign the new extension.

Assemblyman Felipe Fuentes (D-Sylmar), who sponsored the bill known as AB 1069, acknowledged it fell short of his goal, but said he would introduce a new bill calling for a four-year extention when the Legislature returns to session in January.

“This program has been able to create 20,000 jobs and create nearly $4 billion in economic activity,’’ he said, citing a recent study on the film tax credit. “To me it’s a no-brainer to continue the success of this program.”

But Fuentes faces a big obstacle in Senate President Darrell Steinberg (D-Sacramento), who opposed a five-year extension, contending further study was needed to demonstrate the tax credit's effectiveness.